Having decided that the patent problem is an attempt to solve a public goods problem, as we did in part 1, let's have a look at the specific ways that we put our oar into those perfect and competitive free markets.
It's worth just noting that patents and copyright are not, absolutely not, the product of some fevered free market …

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Change the incentives of the patent office

Currently, the USPTO has all the incentives to accept just about anything as a patent. More patents accepted is seen as more productive; I believe applicants even have to pay more, once a patent is accepted, to actually get the patent, than if the patent is rejected.

Instead, ask full price to apply for a patent, and give back a small percentage if the patent is accepted. The incentive to apply for real patents instead of bullshit is not very important; the important part is that now the USPTO gets more money for rejecting a patent than for accepting it.

Re: Change the incentives of the patent office

Wrong motive. You want the patent office to be penalised for patents that are challenged in the courts and invalidated. They should have no bias either way to granting or rejecting patents, but if they get it wrong ...

Re: Change the incentives of the patent office

That relies on the patent actually being tested in court, which doesn't address the issue with the legalised extortion scamsters who will just drop their suit instead of going to court.

I think the patent office shouldn't be biased, but should act a little like a biased entity and actively trying to invalidate applications by searching for prior art. That way they could clear their backlog by punting patents on existing things, and the patents that did get through would have already stood up to rigorous testing. "Slide to Lock" wouldn't have had a chance.

Re: Change the incentives of the patent office

@Steve Todd - Still the wrong motive, just in the opposite direction. Under your principle, the patent office would be very reluctant to issue *any* patents for fear they may be invalidated, essentially no patents. As you say they should have 'no bias either way' but your system pushes them towards rejecting everything.

My method for improving the USPTO would be to have an ombudsman or USTPO oversight/auditing body (not sure of the US equivalent terms). Think like OFSTED for schools or the NAO for public departments in the UK (not perfect I concede). Having a body that periodically reviews patent decisions (i.e. marking the work of the USPTO) and reporting on good/bad decisions would then give weight to any legal case involving that patent. Compaines litigating would have more confidence of their claim or defence if the patent had already been independantly reviewed, thereby limiting speculative sueballs or compaines trying to defend poor patents through attrition by outspending the party suing them. I recognise that this is more powerful under a 'loser pays' system however.

Furthermore, the oversight body could act as an avenue for appeals - either appeals against rejections by the submitter or against approvals by third parties (other possible owners). Again, if the patent has been reviewed, and subjected to any appeals *early* it prevents many legal arguments later on about the validity and/or ownership of a patent.

Re: Change the incentives of the patent office

Much easier, let the judge decide when he invalidates a patent the amount of fault by the patents office. The scale could be anything between zero for something overruled for an un foreseeable reason, through to a percentage of the legal costs for something with blatant prior art.

The patent office gets an incentive to do a good job. You ensure that they have to give well reasoned arguments for a rejection and include an appeals process to prevent them from rejecting everything.

Re: Change the incentives of the patent office

>Instead, ask full price to apply for a patent, and give back a small percentage if the patent is accepted.

Perhaps students, or individual innovators ("Garden Shed"), can get a substantial discount? If BigCompany has spent hundreds of man hours developing an innovation, then they won't be put off by a patent application fee of a few hundred or thousand dollars. However, to a student this amount of money is prohibitively expensive.

No point in student discounts

Defending a patent costs several hundred thousand. If you do not have that, the trolls won't offer you more than a pint for a patent. A MegaCorp might offer you 99% of the litigation revenue, and then use the patent exclusively for cross-licensing so you get 99% of nothing.

Don Dumb: I have good news for you - there are already plans to create a specialist patent court to rule on the validity of patents and any other type of patent disputes. This will take ordinary judges and juries out of the process and all decisions will be made by patent professionals. Perhaps the European Patent office did not advocate these plans purely out of self-interest. Personally, I think you would stand a better chance in getting justice with trial by ordeal.

It's not supposed to be up to the patent office, at least not entirely. Under current US law, the applicant is supposedly required to present all prior art as part of the application. However two things mitigate against that. First, it requires specialized knowledge and is difficult, time consuming, and expensive to do that. And second, if you do the research and don't happen to find the one patent that can be construed as applying, your liability goes up because (it can be argued) you purposely did not cite the prior art. Worse, you may find that patent and cite it, but then you are pretty much admitting that you are liable for royalties. This is a catch-22. So many institutions tell employees _not_ to look for prior art. So the application may have a few barely-related citations - you have to have _something_ - often expired patents, but basically pretends ignorance, to avoid licensing issues to the prior art holder.

The other problem is that the USPTO by itself can never have a sufficiently conversant staff in every discipline. Patents in high tech fields are often so specialized that only a half dozen people in the world could probably know whether the innovation is unique, etc. IIRC recently the USPTO began to set up a volunteer peer review system. There are many potential issues with that (similar to those in academic peer review), but I think that is a good potential solution to all of the above.

@ Don Dumb

While an improvement, even those don't work. I've only seen one example of the government getting this sort of thing correct, and it doesn't translate well to patents or copyrights.

In the US, for agricultural products testing (fertilizers, pesticides etc.) the government authorizes groups to set standards by which products are tested and independent certified labs perform the tests. Both the standards setting groups and the labs run fair tests because there are competing parties who would stop using the services if the tests became too biased either way. But there typically aren't two competing parties for patent applications.

Although maybe there is potential in the government authorizing private entities to issue patents and copyrights without granting them legal immunity for damages if they improperly issue a patent. Government sets out the rules just like they do now, and courts try them. But either party could include the issuing agency in the lawsuit, so there would be incentive for them to get it right. Or maybe they'd be just as prone to side with the PAE to protect themselves.

The true problem with "prior art" is that it often is not patented. All too often the "inventor" is a mediocrity who has *had an idea* and the experience is so overwhelming, he or she patents the idea simply because they have discovered their own personal brilliance. Corporations treated as people are even worse since their "creativity" is entirely parasitic - yeah maybe they did pay some shmuck to write a program or "design" a prism with rounded corners, but the "corporation," per se, never produced or invented anything.

Re: Change the incentives of the patent office

If you are an individual or a company of less that 500 people you now get 50% off most USPTO fees. Under the newish AIA law if you have an annual income less than about US$150,000 you get 75% off most USPTO fees for the first four full U.S. patent applications.

There is no requirement to search or to "present all prior art". There is only a requirement to present what you know. While some applicants opt for not searching, to have a strong patent one would like everything relevant on the table. If something known at examination time is deemed too close by the examiner the applicant has a chance to argue or to narrow. If it comes up later, during a court case, there is no longer a chance to work around the reference and the patent gets invalidated.

Holding something back that the applicant or their attorneys had and thought was relevant could get the attorney disqualified by the USTO and can get the patent torn up. Not recommended.

Re: Change the incentives of the patent office

Of course, the USPTO and other patent offices do search for prior art and then issue rejections based on what they find. They can't say "it seems obvious to me" but need to find actual, citable material.

Re: Change the incentives of the patent office

Under the relatively new AIA patent laws there are more mechanisms for 3rd parties to request the USPTO perform a reexamination. These proceedings are much less expensive than court cases but are still many thousands of dollars. The USPTO does have the ability to decide, on their own, to reexamine an issued patent. At one time in a previous administration there was a secretive Quality Control Dept. that has since been abolished. The problem they had was they randomly looked over the shoulder of an examiner who had allowed a case and told them to change it to a rejection. (never the other way around) Maybe that would have been OK but the inventor could not interact with the QA people to try to understand their thinking or change their thinking and the examiner - the only person they can talk to - would say "it is out of my hands".

Re: Change the incentives of the patent office

That would appear to be the fundamental problem with patents at the moment - there are two equally worthy groups of people, one with large wallets and one with almost no money. These two groups are fairly equally split between being (potential) patent owners and (potential) patent infringers, so attempts to use financial means to sort it out will never work.

My particular pet peeve though, is that in the old days, filing a patent actually explained to other people how you invention worked, so that when the patent expired, then the state-of-the-art in that particular field automatically took a step forward. Modern patents don't seem to fulfill this part of the bargain - they define what other people are not allowed to do, but when the patent expires, it is useless to _everyone_.

Re: Change the incentives of the patent office

@Don Dumb, 12:19:

The NSA has an extensive internal audit and oversight operation, and a special oversight court. It is clear that many people think that has been pretty much ineffective. Moreover, the Court of Appeals for the Federal Circuit has appellate jurisdiction over most patent issues. In this case, it is reasonable to argue that the oversight court has brought on a major part of the problem of allowing patents on "inventions" that a great many people think ought never to have been granted.

In short, we've tried these things before and found the outcome far less than satisfactory.

Re: Change the incentives of the patent office

It works with other similar departments.

The FAA doesn't refuse to ever issue an airworthiness certificate in case there is a crash, the FDA doesn't block every new drug. Both these operate fairly and effectively (at least compared to the USPTO)

Re: Change the incentives of the patent office

>Of course, the USPTO and other patent offices do search for prior art

It recently changed but the USPTO used to ONLY count prior art in filled US patents - although patents could be overturned in court for any prior art.

There was a notorious case of a US drug company patenting tumeric as an antisceptic. It has been known for 1000s of years and written down in 2500 year old Hindu works - but the Mahabarat's authors forgot to file with USPTO.

Re: Change the incentives of the patent office

Part of the problem here is that "obvious" is very subjective. I have before now, been working on a project, an issue comes up and the immediate thought is "just do X". Then you find that X is patented and one has to wonder about the "non-obvious" requirement for a patent. Admittedly the novel and non-obvious aspect might be in asking the original question, but if something comes up and a large number of people skilled in the art propose the same solution then it's not non-obvious, and probably not novel either.

Proof by assertion

There are some assumptions here that need some justification. For example "If we have no protection of originality, then we get too little innovation." If that's the case, please explain the success of the fashion industry and the ubiquity of celebrity chefs - fashion and recipes are two things that have no "intellectual property" rights protecting them, yet they continue to support huge industries. There's no sign that people have stopped designing new clothes and new ways of decorating our bodies (there never has - do we still wear animal skins?) or thinking up new ways of combining foods.

And what about the near certainty that several people will have a similar idea at the same time (because they're all building on others ideas at the same time - nobody lives in a bubble). Someone gets to "own" an idea that someone else laboured over independently. That's a sensible system that rewards inventors?

The idea that people will stop having creative ideas because they can't stop someone else using them for 15 years (or for 70 years after they have died) is laughably untrue.

All patents have ever done is slow innovation down and hold us back. Or generate money for patent lawyers.

Re: Proof by assertion

Firstly they are swiftly changing markets, do you care if last seasons designs are copied? Secondly the cost of entry is low. You don't need a team of designers working for years to invent a new frock.

There's plenty of historical precedent as to what happens without a patents system. The US got their start into the industrial revolution by wholesale stealing of European patents, but they still saw fit to create their own patent system.

Re: Proof by assertion

The problem with your argument is that innovation then becomes a trade secret. If you have a patent out in the public domain innovators can study it, and improve on it now. That is the whole point of patents. Society enforces your rights to an inventions for a time, and in exchange you explain how your invention works to society.

Re: Proof by assertion

Worth noting that fashion is covered by trademark (you can't go around passing stuff off....very like Apple's design patents) and recipes are covered by copyright. "Lemon chicken" ain't copyright but the specific recipe, the words used to explain it, are.

Re: Proof by assertion

Partial agreement here. Just because nobody is paying me to think of things, I can't stop my brain doing that thinking of things. The only thing that happens without a patent system is that commercially valuable innovations are kept secret. The cruicial keystone of the patent system is that you are *disclosing* the innovation in return for term-limited rights to monopolise it.

Re: Proof by assertion

"Firstly they are swiftly changing markets, do you care if last seasons designs are copied?"

Quite clearly the vendors do care because they go to significant lengths see that people producing and selling counterfeits are prosecuted (with varying degrees of success).

"Secondly the cost of entry is low. You don't need a team of designers working for years to invent a new frock."

A lot of people flog widgets copied verbatim from component vendor app notes, they don't need teams of designers working for years either.

"There's plenty of historical precedent as to what happens without a patents system. The US got their start into the industrial revolution by wholesale stealing of European patents, but they still saw fit to create their own patent system"

The lesson we could take away from that example is that ignoring/not having patents promotes extremely rapid growth and massive trade surplus. China's recent history appears to support that hypothesis as well.

Re: Proof by assertion

You only get rapid growth if you're playing catchup with the rest of the world. That's the important point. Once you've caught up there's no incentive to do your own R&D, and a lot of incentive for the rest of the world not to trade with you. The Chinese are strengthening their own intellectual property laws in case you haven't noticed.

Re: Proof by assertion

"The only thing that happens without a patent system is that commercially valuable innovations are kept secret."

Trade secrets (aka 'valuable innovations') are still kept despite the patent system existing. If the patent system didn't exist, reverse engineering has proven to be a useful counterbalance to monopolies. Compaq ripping off IBM's PC BIOS is a classic example.

The nice thing about reverse engineering as the counterbalance is that the effort required to reverse engineer something tends to be proportional to the effort required to develop it. By contrast the effort to defend/attack a patent bears little relation to the effort involved in developing the IP it is more dependent on how knows who and how deep their pockets are.

At present we have a scenario where engineers are fighting lawyers in the field of law - a scenario where they will almost always lose and end up a lot poorer. If patents were binned we would have engineers out-innovating engineers in a 'free' market which strikes me as a win-win for IP developers AND consumers.

Re: Proof by assertion

Firstly : The goal posts are moving all the time, once you've "caught up" you still need to expend effort to maintain your relative position.

Secondly : If Patents exist you can hold up innovation by simply refusing to license your IP to other people, then you don't need to do any R&D at all. Great for you, sucks for everyone else because prices are maintained at an artificially high level and puts a brake on productivity improvements as well.

Thirdly : Ultimately the market will pay what it can bear, and that figure doesn't change just because some numb nuts has cornered the market. If you happen to be the first to market the chances are you will be profit more highly from it, so the trick is to innovate and bring products to market ASAP.

"The Chinese are strengthening their own intellectual property laws in case you haven't noticed."

If you believe the press at large they are using them to protect their local vendors. I don't see this as a good thing, I see it as a method of obstructing free trade and holding up innovation.

Re: Proof by assertion

Celebrity chefs, fashion designers, are artists sell their names/labels/signatures more than their products, so what they produce is not a 'public good'.

You go to a celebrity chef's restaurant, you think that's him in the kitchen that night? No, but by going there you are showing your friends your affiliation with that chef.

Same with designer labels on stuff (including much Nike and Apple stuff). Knock-offs, even of superior quality to the original, cannot be sold for the same high prices.

And consider what happens to the price of a paint if its attribution changes from a middling artist to a great master -- same painting, same artistic and aesthetic value, but suddenly goes from being worth $20,000 to $20 million.

Re: Proof by assertion

The difference with fashion and cooking is that there may not be a new "thing" invented that can be patentable. E.g. if you come up with a new dress that adds say, a frill here and there, this might best be described as a "design" change rather than an invention as all of the elements were know before, but have now been arranged differently.

However, if, in the production of this dress there was a new type of stitch used that was as strong as the usual one but used less thread, then this would be inventive and could be patented.

From what I remember, registering and attempting to protect a design is very weak as you can only register your specific design - if you design a cup, then this is your design. If someone then comes along and adds a handle, then this is a new design.

Re: Proof by assertion

There is some sense in a very short protection - allowing an idea to be realised, tested & marketed by a small company, before a large comapny can copy it - but not much justification for a lengthy ban on copying.

Re: Proof by assertion

> The problem with your argument is that innovation then becomes a trade secret.

...which is really no different then the situation we already have.

Patent applications are CRAP. They SUCK as documentation. They're worthless for their stated purpose of disclosing trade secrets. Beyond that, something being a "trade secret" is more advantageous because it allows all of the trivial crap that can be recreated by undergraduates to be safely recreated by other companies.

On top of all of that we have the treble damages rule which ensures that NO ONE ever looks at the patent database anyways. They do this to avoid further liability.

Re: Proof by assertion

It is also worth stressing what can and cannot be copyrighted (as opposed to patented) in fashion or cooking, etc. It is touched upon in the article in relation to copyrighting code (copyrights don't cover *ideas*, just specific embodiments), but not in much detail. It is, IMHO, *very* different from Apple's design patents. Given our experience in our industry we tend to strongly associate copyrights and patents with royalties owed, and it is not always the case in other fields.

AFAIK, recipes themselves (as lists of ingredients and instructions) are not copyrightable. They are treated as "expression of facts". Nor is cooking considered innovation. Literary works and art are protected though. Thus, a particular literary form used to describe a recipe, an accompanying picture, or a compilation such as a cookbook are copyrightable. In other words, anyone can publish or cook a dish identical to that offered by Paul Bocuse (and advertise it as such, typically using terms such as "adapted from", "based on", etc.), with no royalties to be paid, but copying a cookbook of his would be an infringement. If you lift a colourful set of instructions verbatim and/or a picture from somewhere you may find yourself in hot water or eaten alive. Passing a barely modified recipe by someone else as your own is, at the very least, unethical.

As another example, jewellery can be copyrighted, but AFAIK it basically covers knocking off exact copies and selling them. You cannot copyright or patent "a brooch with a bird" and demand royalties, even if you are the first to come up with the idea. My understanding is that in the world of fashion and accessories elements of your design (think of rounded corners as an equivalent of a particular sleeve or collar or hem in this regard) cannot be copyrighted in general.

Re: Proof by assertion

What about a path to improvements upon inventions?

If I create a widget that IS novel, non-obvioius, and sells to some extent, then good on me.

If someone comes along, and senses that I've been lazy and not diligently keeping the product in a state of improvement and up-take by the consumer base I've earned, and then that new party actually creates a stellarly-better derivative, and it outsells mine because of laziness on my part, then GOOD ON the UPSTART.

Isn't competition supposed to reign? In boxing, then winner is the one standing, not the one down for the count. But, if the one standing has razors or metal in the gloves, then the one wrongfully scratched up should have significant compensation REwarded, and the wrongdoer some punishment AWardded.

Still, the first-to-file and the first-to-invent systems BOTH are flawed. What should matter most is the product that sells better due to merits, not superior advertising more than product quality, and if necessary, experts and non-experts put under blind testing if the occasion arises to duke things out in a court battle.

First to file screws those who have no resources to even file for a new or a modified, legitimately-royalties-avoiding derivative or variation. First to invent screws those who truly have valid, worthwhile improvements to take to market. Ingenuity should, not king-of-the-laziness-hill, should have priority. The ingenuity that injects improvements and freshness should have room to work, without fear of being reamed by despicable PAEs. Punishment for a discovered PAE should be the carpet gets pulled from under the ENTIRE PORTFOLIO and anything tenuously connected TO it. And, when the USPTO *enables* PAES, the USPTO needs to be put through the meat grinder, too. Or, at least the involved agents. Otherwise, we're GOING to close in on that evil nexus of small people keeping mum, and big PAEs virtually owning the minds of anyone with an idea.

Re: Proof by assertion

Actually, both chefs and designers have a fair bit of protection for stealing ideas, at least in the relevant period of time. In the US both the Secret Service and the IRS are likely to get involved if you sell knockoffs from a major designer with a company and logo. Same thing for chefs and their recipes.

Re: recipes themselves ... are not copyrightable

I've got shelves of books of copyrighted recipes at home. There is no descriptive or artistic expression in them beyond the list of ingredients and the order in which to mix them and prepare them. Recipes are copyrightable. But rather like tape traders back in the day, most personal infringement isn't caught and prosecuted.

Re: Proof by assertion

>he cruicial keystone of the patent system is that you are *disclosing* the innovation in return for term-limited rights to monopolise it.

The point with tech patents being that they are so strong/long/protected by threat of suit, that they may as well be secret - there's no benefit to the public so why bother granting the property right? Throw them in a PD bucket and let manufacturing finesse sort them out.

Worse, many of the inventions by legitimate companies are legal fictions designed purely to enable the use of legal costs to discourage competition.

Re: Proof by assertion

What this misses is that the inventor with the earth shattering idea may not be in the position to manufacture and market the advance. When you think of a better automobile engine it may the only way for it to get to the world is for you to cut some deal with a major auto manufacture. So you go to them and tell them all about it. They say thanks and make it with no $ going to the inventor. "Good on them"? Do away with patents and the innovative will still win out assumes that the people with the great idea also have the capital, the business background and market conditions to jump into whatever industry the invention falls into. If the response is a good enough idea can attract the capital, etc. how does the inventor safely expose, explain and prove the idea to those with the capital absent patent protection?

Re: recipes themselves ... are not copyrightable

@Tom 13: it is the books that are copyrighted, not the recipes in them.

From http://www.copyright.gov/fls/fl122.html:

"Copyright law does not protect recipes that are mere listings of ingredients. Nor does it protect other mere listings of ingredients such as those found in formulas, compounds, or prescriptions. Copyright protection may, however, extend to substantial literary expression—a description, explanation, or illustration, for example—that accompanies a recipe or formula or to a combination of recipes, as in a cookbook."

As long as you take care to modify the "substantial literary expression <...> that accompanies a recipe" you are fine. (But IANAL.)

Re: Proof by assertion

"What this misses is that the inventor with the earth shattering idea may not be in the position to manufacture and market the advance."

True. However, if they are unwilling/unable to develop manufacturing & marketing 'in-house' they could sell their expertise to manufacturers rather than their idea. Sure it might not be as easy as chillaxing while waiting for a royalty cheque to land on the doormat - but I think it would be more productive for society at large.

Also keep in mind that inventors do get shafted despite holding valid patents, simply because they can't afford to defend them or they are unable to. The reg reported a case a while back concerning a submarine electrical connector being ripped off by a defence contractor - the case was thrown out of court on the grounds that the patent was somehow essential to the defence of the realm.

I once lived next door to a guy who's patent *applications* fell into the national interest category. The last I heard was that the patents applications were locked up in a safe somewhere with no hope of them being granted and no hope of being able to monetize them (the defence contractors who could benefit from them wouldn't have to pay him a cent to see the applications and use them in any case).

Patents are a nice idea, but the fact is they are intended to eliminate competition, and the burden of operating a Patent system increases geometrically year by year due to it's very nature of cataloguing everything that has been patented and having to cross check everything you do against it in order to avoid infringing.

Patents are unsustainable by design regardless of where you stand in the IP debate, and in my view they offer little to no measurable benefit to society as a whole.

You're the loser, you can pay...

This only works if there is someone slightly higher than a complete moron making the decision as to who is right. Current state of patent law indicates that no such higher life form exists in the American patent law courts.

i.e. you have right on your side but some idiot decides you lose and that you really can patent a rectangle with rounded corners

Can of worms

"we'd all like a cure for HIV/Aids in order to bring back the halcyon swinging days of the '70s for example"

and child abuse, sexual abuse of women in the women in the workplace...etc were deemed acceptable behaviour.

In the early eighties when my wife (then my girlfriend) worked for a boss who she kept a bay with a fork and a metal ruler, he had molested all his previous PAs and she made sure that she wasn't the next!

The swinging days had many predators and many more victims :(

I used to think the 1960's and 70's were a golden period, however we are now finding out the dark side of this period where abuse was openly committed and blind eye was turned.

Being the father of three girls I would rather they grew up in a situation where they safe and not taken advantage of.